As a cryptocurrency business in the money transmitter sphere, your company needs someone to monitor every aspect of compliance.
From keeping up with new laws to reporting and record-keeping, there is no shortage of compliance tasks to do on a daily basis. Most businesses in this industry don’t have the luxury of extra time or staff, so these ongoing to-dos can become immensely onerous for already stretched-thin teams. And, it only gets more complicated as your business expands into new states.
Let’s take a look at the daily compliance activities your business needs to keep track of to ensure that you achieve – and maintain – compliance with various federal and state regulators and how you can actually manage them all.
The U.S. Department of Treasury requires money transmitters to run checks against its Office of Foreign Assets Control (OFAC) list of individuals and companies owned, controlled by, or acting for or on behalf of blacklisted countries. Of course, running these checks on new customers should already be part of your account-opening process, but someone at your company also needs to check existing customers against the OFAC list on a regular basis.
Companies that do not adequately screen customers against OFAC face serious consequences for failing to identify and block accounts or funds that are used for illegal purposes, including possible fines and jail time. Keep in mind that this list is updated frequently so screening must be conducted on a recurring basis.
Just doing the searches isn’t enough, however. You must then research any potential positive results to determine if it is indeed a true match rather than a false positive. Some important things to look for are exact name matches, date of birth matches, and customers located in the same area as a Specially Designated Nationals (SDN). If the result is or seems like a match, you must contact OFAC’s hotline and begin the process of blocking the account and its assets.
Absent automation, this can quickly become a time sink, especially as your company grows and the number of customers you serve increases.
Evaluating transaction monitoring alerts
OFAC screening isn’t the only critical monitoring responsibility. Rules-based alerts or “red flags” that come up during the transaction monitoring process must be reviewed and decisioned to determine whether or not a SAR filing is warranted, and your investigation is properly documented. Generally, these alerts, which may be largely automated, should be designed to detect unusual transactions, atypical transaction patterns (e.g., volume, velocity), or customer behaviors.
When creating these alerts, it’s important to think about how unsavory characters may try to circumvent reporting requirements or perpetrate scams. Some things you might consider include:
- Prioritizing alerts based on risk and severity
- Try thinking as an illicit or bad actor might think. This can be a fruitful and powerful thought exercise
- Comparing the suspected activity to historical data to determine how out of character the transaction or behavior is
- Identifying related transactions and accounts and determining if any suspicious and/or unusual activity has occurred
- Reporting credible information to the appropriate authorities.
- Following up with law enforcement as well as regulatory and government entities
As you can see, this is no easy feat; and the above is only a partial summary of what these duties entail. There are tons of hours spent researching, making phone calls, sending emails, and just plain old pondering on how the bad guys do what they do. That might leave little time for doing other compliance work or running a business in general.
Stay on schedule, stay on task
Failing to stay on top of your calendar can cause considerable headaches and can even hit your company in the wallet. But maintaining an updated, reliable calendar is yet another tedious daily assignment that someone in your company must be tasked with doing.
It starts with making the proper entries and ensuring that the dates, times, tasks, and involved persons are all accurate. Next, you’ll have to keep track of any changes and adjust the calendar as necessary. Finally, you have to continuously check your calendar as you may otherwise miss important dates and deadlines.
Shortcomings in a company’s calendar scheduling are actually among the most critical issues a business in the financial industry can have because it may adversely impact a host of essential compliance responsibilities, including OFAC screening, alert routine review and decisions, and other federal and state-mandated money transmitter license (MTL) compliance functions.
An unsustainable situation
Remembering to do all of these and other AML compliance tasks every day is an overwhelming prospect. And yet it has to be done. If you forget to complete any portion of these duties, your entire operation could be in jeopardy.
All of these tasks must be routinely reviewed and audited. Each of these undertakings must be done using up-to-date information, as well as an appropriate monitoring and evaluation processes. In addition to these and other day to day AML responsibilities, crypto companies are required to maintain state money transmitter licenses in every state in which they do business. This includes among other recurring tasks, submitting various reports, communications, documentation, as well as staying engaged with regulatory agencies themselves. The patchwork quilt of state licensing means that regulator requirements, expectations, and points of emphasis can and do vary from state to state. This result is often an impractical amount of staffing power, labor hours, and diversion of your company’s precious resources.
The biggest struggle is getting – and staying – caught up in the day-to-day nuts and bolts of AML and MTL compliance at both the state and federal level. All of the little things that go on in the background have a big impact on the entire operation, but it’s easy to get so busy and consumed with other things that these essential tasks are forgotten or put to the side.
ComplyFit is a groundbreaking tool that helps state money transmitter licensees stay on top of their required license reporting obligations across all 50 states and territories. Our first-of-its-kind solution allows you to create calendar items and set reminders so you don’t have to constantly think about what needs to be done next. You can easily update the calendar when you complete certain tasks. You’ll receive proactive alerts about upcoming tasks letting you know in advance of deadlines, and details and links to resources, forms, and regulatory contact information so that you may take immediate action. Your schedule becomes an automated, streamlined machine and your calendar becomes a useful tool for getting stuff done rather than a place to mark dates and promptly forget about them. You can correct the issues that eat into your company’s productivity and reinvest valuable time into critical business development and compliance responsibilities.
Let ComplyFit take some of your daily to-dos off of your plate. Schedule a demo.